To persuade its customers to conserve energy, Black Hills Energy has developed a plan that would pay for home energy audits, give rebates for more energy-efficient appliances and provide incentives for builders to construct greener homes.

That program comes with a $2.49 million annual price tag, which adds $13 a year onto the average residential heating bill and $27 a year for the average nonresidential customer. Over the five-year plan, the average residential heating bill would increase 1.8 percent.

On Tuesday, the Kansas Corporation Commission will have a public hearing in Lawrence giving customers an opportunity to ask questions and comment on the plan before approval is given. The KCC has to approve any changes in heating costs under the plan.

The KCC has asked all investor-owned utilities to come forward with energy efficiency plans. Black Hills is the first in the state to do so.

Energy efficiency

In the first year, Black Hills Energy expects the programs to reach 3,000 of its 110,000 Kansas customers. Any Black Hills customers can tap into the energy-efficiency programs, which are on a first-come first-served basis, director of energy efficiency Matt Daunis said.

Customers can tap into home energy audits, which would cover low-cost measures to conserve energy such as low-flow shower heads, pipe insulation or faucet aerators.

Eventually, rebates will be offered for installing energy-efficient furnaces, boilers and water heaters. Incentives will be given for residents to upgrade their insulation. And home builders can receive between $1,500 and $5,000 for constructing homes that meet high-energy ratings.

The plan also includes programs that reach low-income customers, target affordable housing and educate schoolchildren.

The plans are based on successful energy efficiency-programs that Black Hills implemented in Colorado and Iowa.

“There is a strong demand among the public for energy-efficiency education and products; this program is designed to meet this need,” said Ivan Vancas, vice president of operations for Colorado and Kansas gas. “Consumers are becoming a lot more aware of energy consumption and what they can do to reduce their profile.”

Program concerns

But David Springe, consumer counsel for The Citizens’ Utility Ratepayer Board, says the program is far too expensive.

“It is great for one of the people who get something — they are using less energy, their heating bill is less,” he said. “But the vast majority of people don’t get anything.”

Springe also takes issue with Black Hills’ request to have the KCC set how much revenue the company can collect from its customers rather than base the revenue on how much natural gas that consumers use.

Black Hills is asking for the change in its revenue stream because the energy-efficiency programs are intended to lower the consumption of energy, which would mean the company wouldn’t recover all of its costs if the programs were successful.

“We’re just asking not to be punished for energy efficiency,” Vancas said.

Generally consumers are against giving companies revenue guarantees, Springe said. But he also opposes the request because if revenue is set by the KCC, then the risk for investors has decreased, so the rate of return on their investment should be lowered. It’s not under Black Hills’ current plan, Springe said.

The final item that concerns Springe is Black Hills’ request to share a portion of the savings generated by the energy-efficiency programs. Under the proposal, Black Hills shareholders would receive 10 percent of the total net benefit from the energy savings.

“They are not losing any money; it’s all the customers’ money funding the program, but they want to take 10 percent off the top,” Springe said.

The KCC will have a hearing on Black Hills’ plan in September and issue an order by the end of December.